Billions More for Wall Street Bankers

Comparing the Spring Resolution to Suspend Tax Exemptions for Wealthy Corporations to House Bill 2078 released in Olympia today.

Don’t get me wrong. I support any bill which cuts corporate tax breaks for wealthy corporations (in this case Wall Street banks) to save $170 million in school funding. But there are several hidden problems with House Bill 2078 which the corporate media is conveniently not telling you.

Despite all the fan fare, there are several reasons to conclude this bill won’t pass – and even if it does pass, it will not come even close to achieving what it says it is intended to do.

Let’s go over a couple of sections in this bill to see what it really means.

This bill reminds me a lot of 2009 HB 2261 (the so called Education Reform bill). The corporate media claimed that it would greatly increase funding for public schools. Instead, it included clauses which voided the protection of the minimum funding levels of the Basic Education Act of 1978 and replace this guarantee with hollow words, empty promises and unfunded mandates. It is extremely inaccurate to claim that after several billion in cuts to school funding in the past three years, that somehow $170 million in repealed tax exemptions will “fully fund critical K-3 class size reductions.”

With one million children attending our over crowded and grossly under-funded public schools, $170 million per biennium is only $$85 billion per year or only $85 per child. It would take $2,000 per child (or $2 billion in reduced corporate welfare) just to bring school funding in our State back up to the national average and class sizes back down to the national average.

House Bill 2078 would not even make up for the additional $400 million cut in school funding coming in June. Or the $200 million cut in school funding from last December. Or the $3 billion in school funding cuts during the past 3 years.

On page 2, line 20, you get an idea of how much money the legislature is giving away in tax exemptions to major banks each year.

You read that right. Each bank is given an incredible $100 million in tax free State income PER YEAR. At an average B & O tax rate of 1.5%, that is $1.5 million per bank! So if we have 100 banks that do business in this State, they each still get a free $1.5 million per year or $150 million total per year or $300 million per biennium. And that is just the tax break for the banks!And that is AFTER the bill passes – and assuming it even does pass. Right now, this single tax break for these banks is closer to $400 million per biennium.

But this is only one of many tax breaks given to wealthy banks.

Banks also get a share of the biggest tax break of them all – the intangible property tax break (whereby intangible property owned by banks and wealthy corporations is exemption from paying our State’s one percent property tax). According to the Washington State Department of Revenue 2008 Tax Exemption report, this single tax break costs our State $20 billion per year! At least one billon of this $20 billion goes directly to wealthy Wall Street bankers.

So that is at least $2 billion per year in State sponsored corporate welfare going to wealthy Wall Street bankers. House Bill 2078 proposed to cut this back by $44 million – or less than 3% of the tax breaks our State gives away to banks each year!

According to the latest report from the US Bureau of Economic Analysis, bank profits increased by a record $58 billion in 2010. As a result banks handed out more than $50 billion in bonuses to Wall Street executives in 2010. (See our article Top Ten Corporate Tax Dodgers for more info on this). A $44 million reduction in corporate welfare would not even make a dent in bank bonuses.

But let’s go to the press release issued today to get some more clues about what is really planned and why this bill may not even pass.

“The B&O exemption for banks, worth $86.6 million over the next two years, will be limited in scope to protect community banks while ensuring that Wall Street banks pay their fair share. The state Department of Revenue has no knowledge of any other state offering a similar exemption.”

Giving away $1.5 million per bank while we are 49th in the nation in school funding and about to fire 5,000 teachers does not seem to me to be “limited in scope.”

But here is the most troubling sentence in the entire press release:

“We hope two-thirds of our colleagues will agree and will support this bill.”

Rep. David Frockt (D-Seattle).

In other words, instead of openly and directly challenging the Eyman Initiative as unconstitutional, the legislature is willing to hide behind Tim Eyman’s skirt and require that the bill receive a two-thirds vote in both the House and the Senate in order to pass. Thus, as few as 17 corporate lobbyists in the Senate can prevent this bill from passing. There is no hope of ever funding the public schools as long as our State legislators lack the political courage to publicly speak out against the Eyman Initiatives. For more on the unconstitutionality of the Eyman Initiatives, click here.

As a consequence, this bill may not even make it out of the House. Here are comments about the two third’s Tim Eyman Bogey Man made the same day the bill was introduced:

Pat Sullivan, D-Covington, in an interview outside the House chambers, said the bill clearly would require a two-thirds vote. House Republicans have said they would not support a tax increase to help close a $5.1 billion budget shortfall.

Rep. Judy Clibborn, D-Mercer Island, said, "They were trying to see if they could get two-thirds signatures. It won't."

So after all the fan fare, this bill is likely much to do about nothing. But here are some nice sounding quotes from the bills sponsors. If they really mean any of this, then they need to stand up to Tim Eyman and demand a fair tax structure and suspending ALL tax exemptions to ALL wealthy corporations by a simple majority vote. In other words, they should adopt the Resolution to suspend tax exemptions for wealthy corporations. Click here to sign our petition.

“When we’re faced with a choice to cut education funding or cut tax breaks for tourists and big Wall Street banks that can afford million-dollar bonuses for their CEO’s, it’s an easy choice,” says Rep. Laurie Jinkins (D-Tacoma). “If JPMorgan Chase can afford to give Jamie Dimon a $19 million raise, they can afford to give up this tax break. This is about making banks pay their fair share, just like they have to do in every other state.”

“As a former school board member, I’ve seen the impact of dwindling resources on our students and classrooms,” said Rep. Kristine Lytton (D-Anacortes). “Now, as a state representative, I hear from concerned parents and teachers in our community every day, urging us to find any possible way to fund our state’s paramount duty. This bill does just that. I came to Olympia to do what’s best for all of us in Washington, not just those who benefit from an outdated tax code.”

“Tax exemptions deserve the same level of scrutiny as any other kind of state spending,” said Rep. David Frockt (D-Seattle). “Our paramount duty is to fund education, not preferences that disproportionately benefit the bailed out financial institutions whose business practices got us into this mess. “

“Smaller class size is one of the best investments we can make in the future of our state. We need to prioritize our children and their academic achievement over the continuation of special tax breaks,” said Rep. Andy Billig (D-Spokane), a member of the House of Education Committee. “.”

At best, HB 2078 is little more than a publicity stunt. At worst it is a deceptive and cruel hoax being inflicted on parents and school children. If you think we should be protect the future of our one million children by hiring teachers instead of firing them then do not be fooled by nice sounding press releases from Olympia. Instead, demand a fair tax structure and fair school funding.